Posted
by
timothy
on Tuesday June 05, 2012 @11:50AM
from the rising-tide-raises-all-prices dept.

snydeq writes "The NYTimes reports on the San Francisco's shifting socio-economic landscape thanks to a massive influx of tech workers and tax and regulation breaks to big-name startups. 'In a city often regarded as unfriendly to business, Mayor Edwin M. Lee, elected last year with the tech industry's strong backing, has aggressively courted start-ups. But this boom has also raised fears about the tech industry's growing political clout and its spillover economic effects. Apartment rents have soared to record highs as affordable housing advocates warn that a new wave of gentrification will price middle-class residents out of the city. At risk, many say, are the very qualities that have drawn generations of outsiders here, like the city's diversity and creativity. Families, black residents, artists and others will increasingly be forced across the bridge to Oakland, they warn.'"

SF is a goofy place really. By "gentrification" they often mean simple things. Some neighborhoods are opposed to regular street sweepers or graffiti removal because they fear it will lead to gentrification.

They are a New York paper complaining about a competing city getting all the high tech startups and therefore venture capital now that Wall Street has basically self-destructed the New York financial markets. Meanwhile the same paper is reporting that the jobs ax is going to fall again on the banking sector as upper level management throws middle management overboard in order to save their own bonuses: http://news.yahoo.com/wall-st-few-places-hide-jobs-ax-hovers-220146813--sector.html [yahoo.com]

About the only thing that needs changing about San Francisco (and California, in general) is to not have Prop 13 apply to non-residential commercial properties. There would be a quick rebalancing in what gets built.

>>About the only thing that needs changing about San Francisco (and California, in general) is to not have Prop 13 apply to non-residential commercial properties.

Indeed. Prop 13 is justified in protecting people living on fixed income from the ridiculous raises in property taxes California has gone through in the last couple decades, but there's absolutely no defense for it for commercial products, and it has created a very stilted regulatory regime. Companies will jump through hoops to avoid re-asses

There is rent control [sftu.org] in S.F. But there aren't rent caps, so people that got into apartments in S.F. before the prices went up are relatively safe (then again there are problems if the apartment owner wants to sell/privatize and you are kicked off and can't afford the current rent prices).

As you said, there are no price caps, so what Rent Control does is make prices spiral to very high levels. The landlord factors in that he can only raise the rent a couple percent/year (varies per year based on the a consumer price index) for as long as the tenant lives there so rents are much higher than they otherwise would be. Worse for landlords is that it's exceptionally hard to evict a tenant regardless of cause, especially tenants that are disabled or elderly, so many landlords that might otherwise rent out an inlaw apartment chose not to to avoid the headaches if they get a bad tenant. Even when there is a legitimate reason to evict a tenant, it can take 6 months or longer to evict, after paying thousands in legal fees. If you own a house in SF, you cannot evict a disabled or elderly tenant to move into your own house.

Even if you're not a protected tenant, the owner needs to buy you out ($5,000 per tenant, but you can negotiate higher if the landlord wants to avoid a protracted eviction process) to help cover your relocation.

I spent 10 years in a rent controlled apartment, not because it was a great apartment but when you're paying under $1000/mo for something that would cost $2000/mo to rent today, it's hard to move. I now live in a non-rent controlled house outside of SF (but near transit) and pay much less for this house than if I tried to rent a similar place in SF.

First they complained because of "suburb flight" where affluent persons moved to the suburbs and left-behind a poor base in the city.

Now they are complaining that the affluent people are moving back in.I wish they'd make up their mind.Do they want the upper/middle incomes to leave the city, or stay in the city? Either way, it appears they will wine about it.

Your 17 year-old son. Or three of your brothers and sisters. If you need extra cash, you can also try selling your toilet, I've seen that too. Or only take showers when it rains, to keep your water bill lower.

Right, because all Asians are the same. They all write funny and use chopsticks and have slanted eyes. We all know there is no difference between a muslim third world Malay and a shintoist first world Japanese immigrant. They are all uniformly "Asian".

Who is 'they'? It kinda depends on if they are the same people saying these things or not.

Though in general what urban planners want is balance, so yes, they are likely to raise alarm when things tip too far one way or the other. While I understand the appeal of 'If X is good, going to the extreme of X must be better', this rarely pans out very well in the real word.

I don't know, when I was living in (a very nice part of) San Francisco, local liberals did a pretty good job of not allowing chain or fast food restaurants into the area (resulting in "quaint" locally owned establishments charging $15 for a cheeseburger), enacting very high sales taxes and high parking rates and other measures that did an excellent job of ensuring that there were no smelly poor people polluting the main shopping street. All with good intentions of course.

it takes years to get any large structure built and while you read about politicians and community activist bemoaning the lack of affordable housing you never see real progress. Instead you get locals doing the classic NIMBY maneuver. Oh its fine and dandy if you build it OVER THERE!... which of course the over there crowd don't want it either. Lots of lip service and little action, the point being that the type of construction needed for truly affordable and sustainable housing is not the type that occurs.

then there is the whole concept of what affordable housing really means.

Yep. Our housing finance system forces the middle class portfolio to be overweighted towards leveraged real estate. If you were constructing a portfolio with liquid assets, no manager in his right mind would recommend: 75% REITs bought on margin, 25% other things. Yet that's where a lot of people are except that it's an illiquid asset instead of a REIT.

Until this situation changes, nobody will really want affordable housing despite what they say.

Problem with doing that is that you wipe out the imaginary nest egg that millions of baby boomers have in their housing values to rely on for retirement now, rather than later. And that's an awful lot of people in their 50's and 60's to bankrupt and/or force retention in the job market long past their prime. Not to mention clog up social movement/career advancement for the younger generations. There simply is no good answer.

That's OK, the young people aren't capable of doing the jobs that older people are anyway, and never will be. Once the older generations are gone, it's all over, and you'll have to rely on people in other countries to do those jobs, if they get done at all.

S.F. is schizophrenic in many ways. It is incredibly diverse in many ways. You have the far left fighting the far far left who are fighting the far sideways left. Tiny enclaves exist in what is essentially a small city. You have hipsters and foodies and all variety of pretentiousness moving there for the urban vibe who then avoid the authentic urban decay a couple blocks away. People will live there and commute an hour away rather than be uncool and live outside the city. The economic base is very wea

First they complained because of "suburb flight" where affluent persons moved to the suburbs and left-behind a poor base in the city.

Now they are complaining that the affluent people are moving back in.
I wish they'd make up their mind.
Do they want the upper/middle incomes to leave the city, or stay in the city? Either way, it appears they will wine about it.

There are arguably several things at play here:

Most simply, there isn't a single 'they', so 'they' are always going to sound kind of incoherent, since 'they' are a number of distinct groups with distinct interests.

In addition, it is quite likely that 'they' are complaining because what 'they' really want is a permanent settlement at some equilibrium point between squalor and gentrification, where the really scary crime and abandoned buildings are gone; but the local families who go way back, artistist

My point is that, inevitably those oscillations hurt some people in visible ways. There are also positive effects; but it bleeds, it leads and human-interest sob stuff are always highly visible.

City on an upswing? Here's a story about some colorful local business/resident of 40 years who cannot pay his now tripled rent and is being driven out to make way for a Starbucks and a 'Social Enterprise Incubator'. Artists are hunted down and slain by yuppies, etc, etc.

City on a downswing? Here's an abandoned building, a business going out of business, and a kid who got shot by crack dealers or something, complete with a quote from Police HQ about how terrible budget cuts are for the cops' toy fund.

People don't say(or even necessarily believe) in as many words that "I desire stasis forever and a statistically perfect equilibrium"; but deviations can be painful in quite visible ways for some, even as they are exciting for others.

First they complained because of "suburb flight" where affluent persons moved to the suburbs and left-behind a poor base in the city...I wish they'd make up their mind.

You do see that the two things you mentioned are not opposites, right? Both are essentially the same thing: a geographical segregation of the wealthy and the poor. It's not about whether the rich people are in cities or not, it's about the Eloi/Morlock-like separation between classes. Now if you want to argue that this kind of segregation is healthy and appropriate, then go ahead, but don't be so naive as to think this is an argument about whether it's better for rich people to live in cities or suburbs.

First they complained because of "suburb flight" where affluent persons moved to the suburbs and left-behind a poor base in the city.

Now they are complaining that the affluent people are moving back in.
I wish they'd make up their mind.
Do they want the upper/middle incomes to leave the city, or stay in the city? Either way, it appears they will wine about it.

First of all, San Franciscans have NEVER complained about suburban flight. It isn't, and never has been an issue there.

Secondly, of COURSE they'll "wine" about it. The only real question is whether it will be a Merlot or a Cabernet.

This argument was put to rest in 1993 when DS9 came out and took the undisputed throne. All other arguments revolve around whether Voyager or TGN get the number 2 spot. There really is not too much controversy surrounding Star Trek:

I remember being in San Francisco for a while back around 1999-2001 or so. At the time, a 400 square foot studio was going for something like $1600/month because the.com era had more or less caused the same thing.

I remember people saying that if someone chose to move out of San Francisco to work in another state, they were essentially economic refugees... because they'd never have the capital to move back to San Francisco and buy a place because the market would have left them behind.

Hell, I used to know someone with a 2.5 hour commute because he had the choice of a 4 bedroom house with a yard, or a 2 bedroom tiny apartment. Since he had three kids, it wasn't really a choice.

San Francisco has been really expensive for a long time. I'm not really surprised to hear it hasn't really changed much.

$1600 a month? Try $4000 back then. I had a friend renting a basement for nearly $5000. I lived in the suburbs, out in Dublin and rented a two bedroom for $2400.

The prices have come down a bit but not to the point that it makes any economic sense to live there. The state in general is in deep shit, living there is pointless and building a startup there is fucking suicide.

You know, come to think of it, I think I agree with your number more than mine.

I just remember picking up one of those apartment rental magazines for something to flip through in my hotel room and thinking "WTF is this?".

The prices definitely seemed astronomical to me, and I remember thinking that I didn't have the slightest idea of how most people could afford to live there. I just can't imagine that kind of housing costs.

I landed a job in Arlington, VA and was shocked to find out that to qualify to rent a 400sq' efficiency apartment (1 room with a stove and a toilet), I'd need a roommate. So I moved to the 'burbs and bought a house.

Now the uppity city people look down on me and say that I deserve the traffic I sit in because I chose to live so far from work.

At risk, many say, are the very qualities that have drawn generations of outsiders here, like the city's diversity and creativity. Families, black residents, artists and others will increasingly be forced across the bridge to Oakland, they warn.

Means:

The diversity and creativity formerly accumulated in SF will now spread throughout the SF Bay Area.

At risk, many say, are the very qualities that have drawn generations of outsiders here, like the city's diversity and creativity. Families, black residents, artists and others will increasingly be forced across the bridge to Oakland, they warn.

Means:

The diversity and creativity formerly accumulated in SF will now spread throughout the SF Bay Area.

Why is this a bad thing?

The Bay Area is already pretty diverse. I guess everyone has different ideas when they mention 'diversity,' but, in 7 out of 11 Bay Area counties, caucasians are 48% of the population or lower.

The people who move in say they like the creativity, but how many days of the year do they actual engage with that? Do they go to the museum daily, or are there just visiting at the same rate as someone out of town does? Do they wake up in the morning and head downtown to hang out with the hippies for an hour before driving 50 miles away to their jobs? What they really want I think is the pretentiousness. When they say "I live in The City" you can hear the capitals being pronounced.

I lived in Berkeley for 6 years and visited Oakland often. It used to have more poor blacks but is being taken over by Asian immigrants, hippies who never bathe, or the wealthy professionals from San Francisco.

Not in the slightest. The wealthy professionals wear their designer eco-sandals, grow their organic gardens, take their "eco-trips" to the Amazon, adopt babies from the latest fashionable country for $100,000, and wonder why everyone else cannot live like them.

So there's no way a successful and educated population can be diverse and creative. Got it. I do like to check in on ideologythink now and again.

Why not report on the apparent boon that's coming Oakland's way, what with the tide of diverse and creative refugee artist families heading their way.

Artists have been heading to Oakland for almost two decades now. Oakland is in the midst of full-fledged gentrification and is probably the most desirable place to live in the Bay Area for the under 30 set. So, yeah, it's getting more expensive.

If I were a starving artist, I'd look in Richmond for affordable housing.

If you make X more desirable, you will likewise make X more valuable. It doesn't much matter what X is as long as X is a finite resource. Whether it's a boom town in North Dakota with rents in the thousands of dollars per month or San Francisco is completely moot. Demand increases value, value increases cost, cost decreases affordability.

Why, oh why, are people surprised by this? This was old news in the times or the ancient Romans. To put it simply, this economics 101, supply and demand in action. Next big surprise story, Chinese factories have long hours for little wages, yet still turn down 10 applications for every job?

This has already been happening for quite a while, and among friends who live in the area, San Francisco has already developed a reputation as being a sort of fortress of elite upper middle income people. The city's demographic, according to friends, is most favorable to mid-career types in their late twenties and early thirties: people who have already established their careers and have the money to afford the skyrocketing cost of living in the city but at the same time do not need space for raising children. Lower-middle incomes, poor people and families are being replaced by yuppies. You see similar trends in major cities across the United States, New York, Washington DC, etc., but San Francisco is noteworthy because of the sheer amounts of money being thrown around thanks to the new tech boom.

Rather than complain about Yuppies, why not support the construction of more housing units, so that supply meets demand and prices come down? And don't give me any crap about low income housing versus market rate units. If you build enough ma

Fact of the matter is the whole freaking area is WAY overdue for a huge earthquake of the proportions that crashed and burned the city at the start of the 20th century. Until that occurs I have to wonder about putting my family in danger.

Sure, there is danger everywhere but ask any Geologist about the chances of a major earthquake in San Francisco and it's definitely not trivial.

Get a sense of proportion, how many people died in the Loma Prieta earthquake? 63. Your chances of dying in an earthquake are lower than dying in a terrorist attack or fire. If you are really worried, then move to a one-story house built recently, since construction standards have gone up since 1989.

Fact of the matter is the whole freaking area is WAY overdue for a huge earthquake of the proportions that crashed and burned the city at the start of the 20th century. Until that occurs I have to wonder about putting my family in danger.

Sure, there is danger everywhere but ask any Geologist about the chances of a major earthquake in San Francisco and it's definitely not trivial.

It's more laid back and the Berkeley/Oakland hills are backed up by thousands of acres of parks and undeveloped reservoir land. Plus both the views and the weather are better. And you can get into the city in a matter of minutes plus have a shorter drive to Tahoe and Yosemite.

Wayne Cooksey joined the flight of African-Americans from this city last year to escape soaring rents and buy a home. Michael Higgenbotham left six years ago for a safer neighborhood and better schools for his three children.

One guy bought a home, and the other guy found a better school? Sounds to me like people are moving up in the world! These are two success stories.

Pretty much this. I moved out of state. I now live in Idaho and make half what I used to. However, my living expenses are about 1/8th of what they used to be. I was paying $2000+ in rent on average when I lived int he bay area. I now pay $300. I'll never go back. In just 2 years I have paid off every bill I had with the exception of one because I'm using it to build credit.

Add to this, the average cost of a house out here is just two years of my salary. My fiance and I will be buying in a few months with 40-50% down. I didn't understand how much better it was in other states until I moved to one.

Yes, living in a midwestern state I don't understand why people pay $2,000 a month in rent for a crappy studio apartment just because they are in a "big city". Sure, I could be making "better money" if I moved to the city, but I can live in a house (with quite a bit of land) for $250,000 that would cost nearly $750,000 if I lived in a big city. I pay a lot less taxes, thanks to the internet I can still get 100% of the items that people get in the "big city", gas is cheaper, food is cheaper, and the crime le

People pay more to live in the big city for a lot of reasons. Since there is more of everything there is likely to be more of whatever they find interesting. There are a lot of things that don't achieve critical mass in a small city or a town. Some people like the energy and hubbub of a city, find the millions of people exciting.

I live in a small city and am happy there, but I have friends in big cities and understand why they like it. I like to visit big cities, but I grow claustrophobic surrounded by peo

I now live in Idaho and make half what I used to. However, my living expenses are about 1/8th of what they used to be. I was paying $2000+ in rent on average when I lived int he bay area. I now pay $300.

If you made $100k in SF and paid $12k per year in living expenses, that leaves $88k for other things.

If you now make $50k in idaho and pay $3.6k per year in living expenses, that leaves only $46.4k for other things.

Idaho might be a great place to retire, but if you're still working, I think you were better

I now live in Idaho and make half what I used to. However, my living expenses are about 1/8th of what they used to be. I was paying $2000+ in rent on average when I lived int he bay area. I now pay $300.

If you made $100k in SF and paid $12k per year in living expenses, that leaves $88k for other things.

$2K+ for rent isn't $12K per year in living expenses.

It's closer to $24K just in rent, much less in all those other living expenses.

Expenses besides rent really aren't all that much different in the various parts of the country. I moved to San Francisco from North Carolina and my rent shot up to the moon, that's for sure (from $800 to over $2000).

However, food is a bit cheaper, gas is a bit more expense, my electric bill is a bit less, my internet is cheaper, taxes are a bit more (not THAT much more)...

Bottom line is, besides rent, my expenses are within about 10% of what they were in North Carolina.

So, I agree the person who moved to Idaho would have been better off financially in SF.

I grew up in Cupertino, which when I grew up in the early 80s had the diversity of being white and hispanic. Now if you compare my elementary school class photos of those of the current children, you'll see the diversity is now illustrated by Indian and Chinese.

Same homes. Just now these people pay over $1m for the 1400sq ft house I grew up in.

Diversity is all about which races you need to have to be diverse. Can you be diverse without any african americans? Is it more diverse to have only Indian/Chinese vs. White/Mexican? Btw, in certain schools in Cupertino and parts of Sunnyvale, being white is a minority.

Racial diversity is not what diversity is all about. Its also about differences that tend to break down on financial lines (though that is often just a coincidence of our societal priorities).

A community where a 1400sq ft. house costs $1m has no place for people who devote their lives to educating children, caring for the victims of unpopular maladies like getting old or mental illness, or even ensuring that basic infrastructure is maintained and protected. When the providers of these services are not part of the community, they invisible to residents, the value that they provide is artificially diminished, as is their incentive to perform or even continue to provide services. This drives quality down, and the cost of raising quality up.

Same thing is happening in Manhattan NYC -- Only the very wealthy can afford to live there, so what you end up with is the rich lawyers, wall-street people and the like, and the dirt-poor, homeless types -- and everyone else has to commute in.

I mean really, if you ever want a photograph of the divide between the haves and have-nots, just start clicking away just about anywhere in NYC on an average day, and you'll see a multi-millionaire walking past a homeless dude.

This situation probably sounds like something somewhere on the scale from no big deal to f'in great if you are a 20-30 something temporarily occupying that space between overpaying employer and overcharging rentier.

Meanwhile, cities can not sustain themselves on these kind of demographic patterns. Cities need all kinds of people working at all income levels to work efficiently. Banishing the working poor to the hinterlands drives up costs (commuting). It also perverts the perspectives of those living on either side of the tracks, where the motivations and plights of each other become alien, leading to misunderstanding and unnecessary tensions.

Sooner or later, these booms become busts or the underlying social structure collapses, leaving dysfunction.

What I want to know is how an industry that constantly sells itself on easy communication and reduced operational friction continues to centralize itself in a way that drives up its own costs of living and makes it physically vulnerable.

"Cities need all kinds of people working at all income levels to work efficiently. Banishing the working poor to the hinterlands drives up costs (commuting)."

There is a solution to that developed to a high degree of effectiveness before we even had automobiles. It's called suburban light rail.

Rail still interconnects large swathes of the Northeast where it was too necessary to get murdered, er "displaced" by competing interests.

Commuting by train can be relaxing. I did it for years in North Jersey.Cities don't need the poor to live in them because that CONCENTRATES the poor which exacerbates their problems.

Disperse the poor while facilitating AFFORDABLE commuting so they can work in areas they can't afford to live in. Commuting by rail is much cheaper than trying to maintain a car, much less hassle than driving a car, and when connected to a good subway system is a great way to get around cities.

So the New York Times is complaining that San Francisco rents are too high. Why don't they do an article on how the influx of finance industry professionals are pushing the middle class out of New York? Oh wait, that happened 50 years ago.

Reading some of the early comments, it seems like people are acting like this just affects artists or poor black people or that this is somehow a reversal of white flight (largely a middle-class phenomenon).

I grew up in San Francisco and still live in the Bay Area. Middle-class and even many (by national standards) upper-middle class people have been and continue to be pushed out of the city. It's not really about racial diversity either. It's a socio-economic and cultural thing. It's also an age thing. To me the quintessential San Francisco resident is a yuppy transplant female in her late 20s or early 30s . She works in tech marketing. She's a foodie and loves visiting all the trendy new brunch places and maybe hitting up a street fair afterwards. She could be white, Asian, hispanic or something else. That doesn't mean it's not monotonous and homogenous. It is homogenous and that's what people are complaining about. And if you want to have a family in San Francisco, you need to be downright wealthy. So there's nothing wrong with being a young professional in itself, but when that's all a city has it's lost a lot of its character.

Anyway, such is life in a market economy. I don't know if there's a right or wrong here and a city like San Francisco has seen waves of demographic changes. But don't think this is like people complaining if white people were to return to inner-city Detroit. This is nothing like that. This is really an entire city becoming like the wealthier parts of Manhattan. I don't expect people from other cities to care, but as a San Francisco native I wish Silicon Valley had been a place in Washington state.

My dads side of the family were SF natives going to to the 49ers. None of them live there now. The last one left about 15 years ago. Transplant is right, almost no one who lives there now is from SF, let alone the BA or even California.

"housing advocates warn that a new wave of gentrification will price middle-class residents out of the city"

San Francisco and "middle-class" are mutually exclusive. SF hasn't had any middle-class residents since at least the mid-90's. To be middle-class in SF/BA would be considered almost upper class in most of the rest of the U.S.

Last time I looked at buying SF property potentially to rent out I was scared off by the regulations the city imposes on landlords. How can anyone sleep at night knowing your tenants are more in control than you are? I'm going to bet I'm not the only one with this impression, which would mean given a choice individual owners will sell long before they'll risk getting into the 'affordable rent' game. Same dynamic may be why the developments are condos, not rentals.

In 2000, the anti-gentrification talk really picked up steam. "Dotcommers" were raising the cost of of living, driving people out of affordable neighborhoods. And yes, Oakland was a common destination for people and businesses who could no long afford San Francisco. Someone painted "DIE YUPPIE SCUM" on the sidewalk in my neighborhood. Fliers were posted decrying the whitening of the Mission district.

A friend asked if I thought there was a solution to the gentrification problem. I told him, "Wait a year."

It's a bubble, it'll pop eventually. When people start complaining about too much money coming into the city, you know something's gone awry.

I read the exact same editorial, with a few proper nouns changed, on average, every 2-3 months.

So, given that...

Either:a)It's already happened, since people started shrieking it was going to happen at least as far back as 1995, and probably sooner. Get over it.b)It's never going to happen, because if it hasn't happened since 1995, it never will. Get over it.

Geography isn't a barrier anymore to any sort of.com startup. Heck, it makes more sense to start a business outside of the US than within it. To be honest, it makes more sense to even go outside of Austin and start up a smaller place in a suburb or even a more rural area. Why settle for a studio condo for $90K when you can get a smaller sized house for $90K? Low crime, lower prices, and often highly educated people. I really don't understand why people form businesses and live in highly urban areas (or sta

Please. You've never lived in Texas, and I bet you never even visited. I live in California, and my sister lived in Texas. Taxes and utilities in Texas are crazy high, unless you live in the middle of nowhere. Just because George Bush was governor doesn't mean taxes are low. The taxes on my rental car were outrageous, and my sister paid $250/month electric bills in a new house (Dallas suburb), in addition to very high property taxes. Austin is not cheap either. You are misinformed.

Yuppie Enticement is actually a strategy used by city planners to develop blighted communities. Heard a great story on this on NPR a year or so ago. Basically, you encourage all the artists, musicians, and gays to move into an area and make it hip and interesting. Then, the white bread yuppies who want to be hip and interesting after working their 8-5, 5-6 figure, suit-and-tie jobs move in. That drives up prices on rent, encourages development and businesses to move there to exploit all that yuppie entertainment budget capital. Ba-da-bing, you've got a nice clean area. The gays, artists, and musicians get priced out and go look for a new blighted community where they can afford to live. Rinse, lather, repeat.